Re Fuerta Ltd

• Jurisdiction: Ireland
• Judge: Mr Justice Peter Charleton
• Judgment Date: 22 January 2014
• Neutral Citation: [2014] IEHC 12
• Court: High Court
• Docket Number: Record number 595 COS/2013
• Date: 22 January 2014

Fuerta Ltd, In re

In the matter of Fuerta Limited

and

In the matter of the Companies Acts 1963 to 2012

[2014] IEHC 12

Record number 595 COS/2013

The High Court

Companies - Winding up - Section 213 of the Companies Act 1963 - Just and equitable grounds - Failure to file annual returns - Register of Companies - Loan facility - Security for loan - Failure to respond - Non-compliance - No reasonable alternatives to winding up

In these proceedings, the Bank of Scotland plc (the petitioner) sought to wind up Fuerta Limited under section 213 (f) of the Companies Act 1963 on the ground that it was just and equitable to do so. Fuerta Limited was incorporated in February 2006. The directors of the company had been ‘seriously in default’ in their legal obligations to file annual returns with the Companies Registration Office. It was noted that where such default persisted, the company would be struck off the Register of Companies, following which it would no longer have a corporate personality. Fuerta Limited had been struck off the Register of Companies before, but was successfully restored in June 2010. Since then, however, no annual returns had been filed.

Bank of Scotland made a loan facility for up to €15m under a structure whereby the company held a 61% stake in the investment with individual investors making up 39%. Enforcement of the bank”s security was mandated but a sale of control was only possible where the company complied or through liquidator control. The issue was that the directors failed to positively respond to a series of approaches. The directors were informed of this petition but there was no representation at the hearing. The result of this was that attempting to sell the facility under the rights of Bank of Scotland in securing the loan, was made impossible. It was further noted that the relevant taxation structure for the best use of the assets of the company had a limited time span, to the extent that a deadline of the 28 ^th of January 2014 needed to be met to avail of legislative exemption.

Held by the Court, the invocation of section 213 (f) should not be undertaken lightly, only to be engaged in the ‘most intractable’ situations. It was considered that where other options were available, winding up on the just and equitable ground as a result of a failure to comply with company law should not be invoked. This ground was to be called upon only where there was a ‘most serious’ lack of compliance in addition to an absence of ‘reasonably available’ alternative options. Held by the Court, these elements were present. Despite the petitioner holding back the striking off the register of Fuerta Limited, the Court determined that this had become imminent. Moreover, the correspondence between the Bank of Scotland and the company directors showed no reasonable prospect of alternative avenues for resolving the situation.

Holding that every step that could be taken before resorting to this ‘extreme step’ was taken, the Court ordered that it was both just and equitable that Fuerta Limited should be wound up.

COMPANIES ACT 1963 S213(F)

EBRAHIMI v WESTBOURNE GALLERIES LTD & NAZAR ACHOURY 1973 AC 360 1972 2 WLR 1289 1972 2 AER 492

BLUZWED METALS LTD v TRANSWORLD METALS SA UNREP LAVAN 9.5.2001 2001/2/348

IRISH TOURIST PROMOTIONS LTD, IN RE UNREP KENNY 22.4.1974

COMPANIES ACT 1963 S205

DUBLIN CINEMA GROUP LTD, IN RE UNREP CHARLETON 25.3.2013 2013 IEHC 147

FRENCH & ORS APPLICATIONS TO WIND UP COMPANIES 2ED 2008 602

COUTU & ORS v SAN JOSE MINES LTD 3 BLR (4TH) 22 2005 BCSC 453

DUBLIN & EASTERN REGIONAL TOURISM ORGANISATION LTD, IN RE 1990 1 IR 579 1990/6/1733

1 Mr Justice Peter Charleton delivered on the 22nd of January 2014

2 1. Bank of Scotland pic seeks to wind up Fuerta Limited under section 213 (f) of the Companies Act 1963 on the ground that the court should be "of opinion that it is just and convenient that the company… should be wound up." A novel point arises.

3 2. Section 213(f) is most often associated with situations such as deadlock or oppression. Traditional case law has been based on the decision of the House of Lords in Ebrahimi v Westbourne Galleries Limited [1973] AC 360. Example in Ireland of deadlock, relying on the analysis in earlier English and Irish case law, are Bluzwed Metals Limited v Transworld Metals SA (High Court, unreported, Lavan J, 9 May 2001) and In the Matter of Irish Tourist Promotions Limited (High Court, unreported, Kenny J, 22 April 1974). Oppression by a majority of a minority is quite often brought as a ground for relief under section 205 of the Act of 1963 and not winding up under section 213(f), though there are exceptions; In Re Dublin Cinema Group Limited [2013] IEHC 147. What is clear, however, is that whatever the traditional analysis, the express wording of the subsection is not limited to these instances of deadlock or oppression. In the Ehrahimi case, Wilberforce J at page 374 indicated that it would be wrong to turn illustrations of the jurisdiction into rules limiting that jurisdiction. In Derek French - Applications to Wind Up Companies (2 ^nd edition, 2008) the author describes the following categories as identified in existing decisions:

4 Cases in which the company was promoted fraudulently.

5 Cases in which the company's substratum has gone.

6 Cases in which there is a 'deadlock'.

7 Cases in which there is a constitutional and administrative vacuum.

8 Cases in which the management and conduct of the company are such that it is unjust and inequitable to require the petitioner to continue as a member.

9 Cases in which the company is a quasi-partnership company and the circumstances described [of breakdown of a trusting relationship] exist.

10 3. The author notes that other cases are in a class of their own or constitute a small group. Another approach to classification is to list the instances as: exhaustion of substratum; justifiable lack of confidence in management;...